Corn and soybean farmers near Twin Valley Tire Inc. in Milbank, S.D., have had a good year. The rain fell at the right time, and farmers harvested record yields of the region’s biggest crops. “Most said it was the best they’d ever seen,” says Jamie LaRoche, part-owner of the tire dealership with Brendan Van Sambeek.
If only those bumper crops had been matched by good commodity prices. “The extra bushels made up for some of the poor prices,” LaRoche says. “That really helped. It gave people a good attitude.”
Still, his customers are cautious. “You’ve got to twist their arms a little more to get them to spend the money. You’ve got to give them good service, and that makes up for a lot of the pricing if someone down the road has you beat by a couple bucks.
“They’re being a lot more frugal with what they’re buying,” LaRoche says. “October and November were probably two of our biggest months with the number of service calls, but a lot of it was ‘come and fix it,’ whereas a couple years ago if a tire had 40%, it was ‘replace it.’”
On top of that, farmers are choosing lower-priced tires. “They’re migrating to the cheaper end.”
LaRoche says “the majors” are responding to the shift. They’re becoming more aggressive with rebates, and they’ve dropped their prices. He’s watched the price of one particular tire fall 20%. “From two years ago, I would say prices have dropped by 35%. I don’t want to call them greedy, but look at how much oil has come down and other input costs have come down. They need to compete with the imports.”
LaRoche and Van Sambeek own six stores in South Dakota and Minnesota. (They’re also part-owners of Tires Only Group and Dakota Wholesale Tire Inc., and Smith Tire & Tread, a retread shop in Wahpeton, N.D.) The store in Milbank, S.D., sits on five acres and employs 40 people in a town of 3,300. The group’s smallest store is a one-man, two-bay shop in Browns Valley, Minn.
One of their greatest successes has been selling used farm tires. “I’d rather sell a used tractor tire than a new one. Anyone can have the same new ag tire. But if you own this used farm tire, it’s the only one. If you trade it in right, you can make some money on it,” LaRoche says. “We’ve probably got $1 million in used farm tires right now.”
He expects those used tire sales, and other low-cost options, to remain a big part of the business. Already local bankers are warning their customers not to come looking for more credit. “I expect next year to be a little bit tougher. I’ve been told by our bankers they’re telling farmers, ‘You’re not going to buy a new tractor, or a new pickup.’” Those bankers don’t want LaRoche to extend too much credit to his customers, and they also want him to watch his business’ spending, too. “It’s not the glory days of three years ago when corn was $7 a bushel and beans were $15.”
Farmers continue to shop for value
Along the East Coast, Gallagher Tire Inc. has grown from a two-bay retail service garage in 1968 into a wholesaler with three warehouses and customers that stretch from Maine to the Carolinas. J.P. Gallagher is the president of the business his father and uncle started, and says farm tires represent about 20% of the company’s specialty tire business.
The biggest driver continues to be price. “The sense of value has not left the farmers. From my perspective they are very happy with some of the imports like Alliance and Crop Max,” Gallagher says. “They’re seeing the price point and know they’re going to get a reasonable value for their dollar.
“Ten years ago there was more of a focus on the name brand tires because the imports weren’t there as far as quality. Now that gap has closed, and dealers we service who were traditionally a one-brand offering, now will typically offer two or three because their farmers are demanding that.”
As farmers and dealers turn more to imports, it’s more important for wholesalers like Gallagher to better manage their inventory and flow of overseas shipments. “Very few dealers want to stock beyond a few key sizes,” he says. The average is 90 days from order to delivery, but problems at ports or other hiccups can add two or four weeks to that lead time. “There’s a cushion you need, maybe an extra 30 days of stock.” ■
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